I believe 1 would be the best. Surrender at any time, but if you're sinking/fire you cannot surrender. Perhaps if you sink your entire crew does not die, while the survivors clinging to boards may not have a way to make it back to port, since this isn't 100% realistic game, this wouldn't be a terrible option, maybe you could role play it as a fisherman brought them back to port.
With 2, a ship usually would surrender due to how much of the crew is lost/injured, damage to the ship, or how much of the fleet has surrendered/lost. So having the option only opened in the first 5 minutes I do not a